Check the building warranty when you buy a new house
you are looking to buy is rare but does happen.
The sale contract prepared by the developer’s conveyancer should provide for the property to carry the benefit of the NHBC scheme and this is supported by the fact NHBC documentation has been provided by them to your conveyancer. The documentation is known as the Buildmark Cover and will detail the name of the developer or developer company who registered the property with NHBC at the outset, prior to the commencement of construction.
This part of the documentation is issued before structural completion and many conveyancers do not make any further checks until the Cover Note and Acceptance documents are issued. These documents will only be issued once the property is fully built and has been finally inspected by the NHBC surveyor.
It is important to check that the registered developer is still current on the NHBC register and this is clearly the action your conveyancer has taken.
If they are not on the current register then NHBC will not offer the cover and the warranty will not be available. There are a number of reasons why the current developer may have been removed from the register such as sub-standard workmanship, non payment of NHBC fees etc. The timing is crucial as they have left the register after the house building commenced and possibly completed but prior to exchange of contracts.
However, the developer is under a duty to disclose the change in circumstances and the unavailability of the NHBC warranty to his conveyancer as they cannot contract with you to sell the property with NHBC cover.
Research carried out in 2010 determined that more than 50 per cent of buyer’s conveyancers did not verify if the developer was currently NHBC registered just prior to the exchange of contracts. Your conveyancer has been diligent and has followed the relevant guidelines.
If the developer leaves the NHBC register after exchange of contracts but prior to completion, NHBC are only obliged to provide the benefits listed in section 1 of the Buildmark Cover.
They will normally either pay to complete the building or refund the deposit paid. There are limited options; The seller should be asked to explain the current issues and to reinstate with NHBC or to provide cover from an alternative warranty provider. This may be costly as the premium charged by a new provider to carry out an inspection and provide a warranty will be hefty.
There are only a limited number of companies prepared to provide this retrospective warranty. Indemnity insurance is not normally available as the house is less than 12 months old.
Without an acceptable warranty or architect’s certificate, lenders will not provide a mortgage over the property.
John Robson is residential conveyancing manager at Ford & Warren, Leeds.